Earnings Update: Here's Why Analysts Just Lifted Their Agora, Inc. (NASDAQ:API) Price Target To US$6.05

It's shaping up to be a tough period for Agora, Inc. (NASDAQ:API), which a week ago released some disappointing full-year results that could have a notable impact on how the market views the stock. Revenues missed expectations somewhat, coming in at US$133m, but statutory earnings fell catastrophically short, with a loss of US$0.46 some 25% larger than what the analysts had predicted. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Agora

Following the latest results, Agora's three analysts are now forecasting revenues of US$139.9m in 2025. This would be a credible 5.0% improvement in revenue compared to the last 12 months. Agora is also expected to turn profitable, with statutory earnings of US$0.053 per share. Before this latest report, the consensus had been expecting revenues of US$149.1m and US$0.017 per share in losses. Although the analysts have reduced their revenue expectations, they now expect the business to reach profitability sooner than previously assumed, which makes it look as though there's been a pretty serious improvement in sentiment following the latest results.

The average price target rose 10.0% to US$6.05, with the analysts signalling that the improved earnings outlook is the key driver of value for shareholders - enough to offset the reduction in revenue estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Agora analyst has a price target of US$7.10 per share, while the most pessimistic values it at US$5.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The period to the end of 2025 brings more of the same, according to the analysts, with revenue forecast to display 5.0% growth on an annualised basis. That is in line with its 5.9% annual growth over the past five years. Compare this with the broader industry (in aggregate), which analyst estimates suggest will see revenues grow 12% annually. So it's pretty clear that Agora is expected to grow slower than similar companies in the same industry.

The Bottom Line

The most important thing to take away is that the analysts now expect Agora to become profitable next year, compared to previous expectations that it would report a loss. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Even so, long term profitability is more important for the value creation process. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Agora. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Agora analysts - going out to 2027, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 1 warning sign for Agora you should know about.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.